Signet Offers Credit To Poor, High Risks

New Card Requires $300 In Savings

August 29, 1992|By DAVID RESS Daily Press

Signet Bank plans to start full-scale marketing of a new credit card aimed at people with poor or no credit histories, a bank official said Friday.

Senior Vice President Nigel Morris said that after a two-year test, the state's third-biggest bank is joining the handful of small institutions across the country that offer secured cards. Signet is the first bank in Virginia to do so.

It will issue cards to people who put at least $300 into a 5-percent savings account.

The card will give them a credit line equal to the amount in the account, up to a maximum of $5,000. If customers maintain a good payment record, the credit line will be increased without having to make additional deposits into the savings account.

Morris said that so far Signet has not had any unusually bad problems with secured card bills not being paid.

``We're reading the early election returns and we're feeling relatively comfortable,'' he said.

Secured card holders will pay a 19.8-percent interest rate on any charges made with the card, and a $20 a year fee.

In contrast, First State Bank, of Wilmington, Del., charges a 12.99-percent rate on some of its secured cards, but requires an annual fee of $75, according to figures from the Bankcard Holders of America, a consumer group.

First Interstate Bank of South Dakota charges 18 percent and a annual fee of $35, but pays no interest on the savings account, while Key Federal Savings Bank, in Havre de Grace, Md., charges 21.99 percent and a $35 fee. Dreyfus Thrift and Commerce's Mastercard charges 19.8 percent and a $25 annual fee, but pays only 3 percent on the back-up savings account.

There is no charge for applying for the card, unlike the situation with some of the so-called ``guaranteed credit'' plans that typically demand stiff application fees and then may wind up telling applicants they did not qualify for credit.

Signet said the card will work like any standard MasterCard or Visa credit card. Any transactions will be reported to credit bureaus in the same way as for a standard credit card, allowing customers to build up a good credit record, the bank said.